The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: giggles on November 30, 2012, 01:19:07 PM
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We are hoping to purchase our first house with a traditional 30 year fixed loan.
I am a bit disappointed with the 3.5% rate we were offered. Need to double check on the APR, which is sure to be higher. I was really hoping for 3.4% or ideally 3.25%. I want to keep shopping around. I would love to hear what rates you all are getting and from which bank!
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3.5% sounds great. You can't get much lower than that unless you're doing a 15 or 20 year.
I'm almost done refinancing and I have my rate locked in a 3.75%
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I just refinanced with a no cost loan for 3.5% and I thought that was good for a 30 year loan.
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I'm at 2.875, but that's for a 15 year. I think 3.5 sounds pretty good for a 30 year, but it never hurts to shop around.
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A mortgage rate needs context to determine if it is high or reasonable. Rates depend on the lender, your credit score, your loan to value ratio, the type of loan, the points and fees, among other criteria. On the surface, that rate seems high right now. Is your credit score less than 720? Is the lender absorbing points and fees? Is this an FHA or VA loan? Is lhe loan to value ratio greater than 80 percent? All these factors will affect the rate and APR you are offered.
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haha, ok, maybe I am overly sensitive. We would have just over 30% down, my credit score is 780 and DH's is 720. No FHA, no points.
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We just closed on 3.75% 30 year. 3.5 sounds great!
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If you are paying closing costs but no points, putting 30 percent down and have those credit scores, I would shop around. You won't be able to lock until you find the property anyway.
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We just closed on a 15 year at 3.0 they paid us 900 to do and we didnt have to escrow.
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Yes, we were planning to pay our own closing costs. If we can't get them to lower the rate, could we ask them to pay part of the costs? We are going for a 2nd look at a property tomorrow, and hoping to put in an offer this weekend.
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You can try to negotiate, but that works better when you have a competing offer. Rates change every day, often more than once a day. If you find a really good loan broker, they will watch the rate and call you to lock when the market moves down.
Your rate sounds high, even with no points. You can use that preapproval to make the offer while you are shopping other lenders. When you shop, make sure you are comparing apples to apples. You got a quote with no points and you paying standard title fees. Get the same from everyone. Mortgage rates and fees are like an amoeba. Squeeze one part of the deal, and the costs and profit ooze into another part. One lender will quote a low rate with points and high fees. Another will try to sell you a "no cost" mortgage with a higher rate. They are getting a yield spread premium (kickback) from the actual lender and using some of that money to pay your closing costs. Tell all the lenders you are shopping rates AND fees.
For example, Salmp01 (see above) just did a no cost refi ar 3.5 percent for 30 years. I am near to closing a 3.125 percent refinance with one point and closing costs. To the lender, these are nearly equal deals, and we probably locked around the same time. His/her payback period is zero. It will take a long time for me to recoup my costs vs that deal, but I intend to hold the property for longer than 10 years and never refinance again.
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You might consider alternatives to a traditional 30-year fixed-rate mortgage.
I have excellent credit, but my wife and I just closed on a house with a 10 / 1 ARM mortgage at 2.5%. For those who may not know that means it's a 30 year Adjustable Rate Mortgage where my interest rate for the first 10 years is 2.5%. After that my interest rate adjust every 1 years according to a fixed formula (in my case, I think it's LIBOR + 1%). So our interest rates in the last 20 years of the mortgage are almost certainly going to be higher than the 3.5% that we could get with a fixed rate mortgage now, depending on what LIBOR is in 10-30 years.
Why would we do such a thing?
First, the fact that it's a 30 year mortgage means that our required minimum payments are going to be extremely low. We could probably have gotten a similar rate with a 10 or 15 year fixed-rate mortgage, but then our required minimum payments would have been higher. This way we have the flexibility to spend that extra several hundred dollars per month on something else if something comes up.
Second, there is a good chance that we will be able to pay off the mortgage entirely after 10 years, which would mean we would never have to pay more than the 2.5%, so what does it matter that it was an ARM? I know that we can almost certainly find ways to invest my money that would have a better rate of return than 2.5% over 10 years, however I am also fairly conservative and the value of having no debt whatsoever is to me significantly larger than a little bit more interest. Furthermore we plan on mitigating the loss of our potential gains by investing some (most?) of the money that is eventually destined for the house, and then just cash it out right before we hit that 10 year mark, mail in a very big check, and call it a very good day.
Third, even if we are not able to pay off the mortgage after 10 years we should still be able to pay it down significantly. Since our principle will be significantly smaller in 10 years then even if our interest rate is significantly higher than it would have been on a 30-year fixed mortgage, it would take a difficult-to-estimate-precisely but Fairly Long Time before the average interest rate would catch up to the fixed rate. So if we paid it off any time between 10 years and that Fairly Long Time the ARM mortgage was still a better decision over the fixed-rate mortgage. If we take longer than that FLT but not much longer, then the fixed-rate mortgage would have been mathematically the better choice, but the ARM would still have been a Pretty Good choice given it's potential (but unrealized) upsides. It's only if you take a large fraction of the term to pay it off that it's almost certainly better to go with the fixed-rate mortgage (I'm guessing, but I'd say 20-30 years?).
Hopefully that should give you another option to consider. If you plan on taking all 30 years to pay it off then yes, I'd say lock in that low rate while you can. However if you plan on paying it off early, then you can take advantage of the system that assumes you'll take all 30 years to get a significantly better deal with very little risk.
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It's certainly within normal range for today and your situation, so don't feel like you are being screwed with that rate. It's certainly possible you could do better with research and more effort though, just takes contacting banks and mortgage agents to get offers and weed through them until you find the best.
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Closed last month on a 30 yr VA loan. first payment will be due January 1st
3.25%, no points, lender credit was over $3000 more than the closing costs.
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when we bought our cottage in aug, we got 2.94 for a 25yr with ING (in ontario)
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Right now anything SUB 4.0% is a standard deal. Anything SUB 3.75% is a good deal. Anything SUB 3.5% is a great deal.
It seems we hit the bottom interest rates and they are slowly crawling back up. Take a peak at the link for some data.
http://www.mortgagenewsdaily.com/mortgage_rates/ (http://www.mortgagenewsdaily.com/mortgage_rates/)
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Closed 8/2012. I paid closing costs. Zero down OOP, used DPA program. 30 year locked @ 3.25%. Used points to buy down from 3.75%. (My house was inexpensive. Cost was like $160)
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2.99 on a 15yr. We got offered lower... down to 2.68 with points, but the different in the closing costs vs saved over life of loan wasn't worth it. 3.125 was the highest offer.
for 180k on the east coast
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30 year fixed with no points 3.375.
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I've got a variable rate mortgage that is set to Prime - 0.8%, adjusting monthly with changes to the prime rate.
Bank of Canada prime has been 3% for the last few years so I've been paying 2.2%.
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20 year loan at 3.875, but I aim to have it paid off in 2027 when I retire. Or earlier.
My original mortgage from 2007 was a 30 year/ 6.5 IO for the first ten years. It seems doubtful to me that I will refi a third time because I don't imagine rates can go much lower, but we shall see.
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30 year fixed with no points 3.375.
Same here, just locked on 30 year at 3.375% with no points.
I have no intention of paying it off early, but I probably won't be here longer than 10 years (at the most) anyway.
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3.875, but on a Owner-Occ duplex. Just closed the other day, but that was a 60 day lock. Would've been 1/8 lower or so if it was a SFH, I'm told.
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7.5% here because we have a land/farm loan, not a traditional mortgage. Needless to say, we're paying the thing off; will be done the first of September.
Editing to add that will be four years and two months into the loan; we stopped payments for nearly a year while we built the house.
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As others have mentioned, the key thing is the loads and loads of fees that they hit you up with. The "Good Faith Estimate" is only an estimate, and it may not include various fees that they put different, official-sounding names next to (i.e. they're not government mandated or required fees, like "documentation", etc.)
Credit unions, by their nature, will work to serve YOU first, not the shareholders, because as a customer of the credit union, YOU are the shareholder. As such, they will not be as inclined to hit you up with loads of fees to maximize their profits.
I have a 5 year Home Equity Loan with PenFed credit union, but their current 30 year fixed is about 3.25% or 3.375% with no points, and I would be willing to bet that once everything is said and done, their total fees they hit you up with will be less than the average broker or bank out there.
As an example,when I did my 5 year HE Loan, they advertised zero costs - and they meant it! Absolutely no costs to take out my loan (if your equity value is less than 70% in most areas, they are willing to do a comparison by using your appraised real estate tax records, but if your Loan to Value is more than 70%, they will get an appraisal for about $300 that they add to your loan).
The one caveat with PenFed is that they do add on a 1% fee to all fixed-rate mortgage products (which they state at the bottom of the website). If you go with an adjustable rate mortgage (like a 5/5, where it's a fixed rate for the first 5 years, then adjusts a maximum of 2% every 5 years thereafter), then there is no 1% fee.
If you don't have a service record to qualify for PenFed membership, you just pay a one-time $20 fee to the National Military Family Association, and you quality to join. PenFed also has great car loans (0.5% and 1.5%).
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Found this necrothread while trying to decide on 30 year fixed vs. ARM. Looking at your rates I'm so mad at you right now. Anyways, my reasoning is similar to Sherr's:
Lower upfront rate. Possible spread of 1.5% for at least a few years.
If rates go up, well we have the cash to pay down the mortgage, and at our savings rate could pay off the entire loan.
If rates stay low, we win.
That said, I'm still leaning towards fixed because my optimism gun says equities will always be a good bet against LIBOR+1% (or whatever the ARM resets to). What says you?
P.S. I'm still getting what I consider an awesome 30 year rate -- 3.875%, plus some other small incentives.
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3.875, Wow that is good but what are your closing costs?
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Mmmmm, necrothread (drooling).
Sounds like a nice rate to me. I'd go fixed and pay it according to the amort.
Since I didn't post the first time around: 2.875% 15 yr at a bank with no closing costs last spring. I know the banker well.
Congrats on the purchase. Did you go house or condo? Did you post back on that thread about the purchase?
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3.875, Wow that is good but what are your closing costs?
It's negative points, so bank related fees are like net $300. That doesn't include escrow/title insurance and all the other non-bank fees (insurance, taxes, etc.). Cash to close (cash to close minus down payment) is well under 1% of home price... I don't know what everyone is complaining about (probably because my denominator in this equation is too high).
Same bank quotes:
5/1 2.875% no points
7/1 3% no points
Mmmmm, necrothread (drooling).
Sounds like a nice rate to me. I'd go fixed and pay it according to the amort.
Since I didn't post the first time around: 2.875% 15 yr at a bank with no closing costs last spring. I know the banker well.
Congrats on the purchase. Did you go house or condo? Did you post back on that thread about the purchase?
LOL, I can't keep track of all my threads. I went with a house, but it's not the one with the giant orchard (exaggeration) that I mentioned in one thread. This one has a down slope and retaining wall, though, so I'm a little freaked out by the perceived need to further terrace or otherwise mitigate erosion (looking at native plants). Paying a bit more for better inspections on hill stability, but open to suggestions on that front (maybe PM me if anyone has thoughts).
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3.875, Wow that is good but what are your closing costs?
That is good now, but in April 2013 when I wrote that, it wasn't outrageously good. Just quite reasonable.
Closing costs were reasonable as well.
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I was referring to Dragoncars post from a few days ago.. I presume that is a rate he just got, perhaps not. 3.875 here, now on a 30 yr fix is insane unless you are doing a ton of points.
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I was referring to Dragoncars post from a few days ago.. I presume that is a rate he just got, perhaps not. 3.875 here, now on a 30 yr fix is insane unless you are doing a ton of points.
Yes, just locked it in. Seemed crazy to me with .125% loan rebate, plus they'll give me 1% cash back on automatic mortgage payments from their checking account (which they claim works out to be another .1% discount).
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7.5% here because we have a land/farm loan, not a traditional mortgage. Needless to say, we're paying the thing off; will be done the first of September.
Editing to add that will be four years and two months into the loan; we stopped payments for nearly a year while we built the house.
Wow, I really thought I would have the highest at a 7% for 7 years, (annutized like a 30yr at 7%). I will be done March of next year, hopefully. Currently on track! Same situation with a land loan.
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1.99% fixed. No closing costs.
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3.625% for a 15 yr loan
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7.5% here because we have a land/farm loan, not a traditional mortgage. Needless to say, we're paying the thing off; will be done the first of September.
Editing to add that will be four years and two months into the loan; we stopped payments for nearly a year while we built the house.
Wow, I really thought I would have the highest at a 7% for 7 years, (annutized like a 30yr at 7%). I will be done March of next year, hopefully. Currently on track! Same situation with a land loan.
Yes, we went ahead and paid it off, actually in May 2013. Bad as it was, though, the rate was lower than my parents paid on their traditional 30-year mortgage in the 70s. These low rates are not a permanent thing today.
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Dragon car, what are your closing costs? Whose the lender?
I just applied for a 10/1 - 2/2/5 ARM at 3.375% w/ $1300 in closing. Refinancing from a 30 yr fix at 4.625 acquired 6 months ago. Possibly would have sprung for that fixed if it were available to me. Though, my best guess is I will own this particular home for under ten years so perhaps not.
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2.75% with a 15 year loan when we refinanced a year ago (Houston, TX)
I can't remember who the lender is because it was just sold...again!
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Dragon car, what are your closing costs? Whose the lender?
I just applied for a 10/1 - 2/2/5 ARM at 3.375% w/ $1300 in closing. Refinancing from a 30 yr fix at 4.625 acquired 6 months ago. Possibly would have sprung for that fixed if it were available to me. Though, my best guess is I will own this particular home for under ten years so perhaps not.
See above for closing costs. It's from chase you can check their estimation tool here (mine was slightly better than the tool quoted):
https://apply.chase.com/mortgage/CRQ/CustomRateQuote.aspx
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3.375% 30 yr fixed. We bought in August 2012. We don't plan on paying it down faster. The plan is to move around the time we hit FIRE, 10ish years.
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3.375% 30 yr fixed. We bought in August 2012. We don't plan on paying it down faster. The plan is to move around the time we hit FIRE, 10ish years.
10 years seems good... the NYT calculator usually gives 10-15 years as the holding period when holding cost actually starts going back up (because you build up so much equity that is not in the stock market). That leads me to think I might expect to cash-out refinance around then.... or cash-out sell to move to low COL.
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Dragon car, what are your closing costs? Whose the lender?
I just applied for a 10/1 - 2/2/5 ARM at 3.375% w/ $1300 in closing. Refinancing from a 30 yr fix at 4.625 acquired 6 months ago. Possibly would have sprung for that fixed if it were available to me. Though, my best guess is I will own this particular home for under ten years so perhaps not.
See above for closing costs. It's from chase you can check their estimation tool here (mine was slightly better than the tool quoted):
https://apply.chase.com/mortgage/CRQ/CustomRateQuote.aspx
What did the calculator quote you? I'm not seeing better than %4.125 for a 30 year fixed (California).
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Dragon car, what are your closing costs? Whose the lender?
I just applied for a 10/1 - 2/2/5 ARM at 3.375% w/ $1300 in closing. Refinancing from a 30 yr fix at 4.625 acquired 6 months ago. Possibly would have sprung for that fixed if it were available to me. Though, my best guess is I will own this particular home for under ten years so perhaps not.
See above for closing costs. It's from chase you can check their estimation tool here (mine was slightly better than the tool quoted):
https://apply.chase.com/mortgage/CRQ/CustomRateQuote.aspx
What did the calculator quote you? I'm not seeing better than %4.125 for a 30 year fixed (California).
Ran it today for 3.75 at .5 points... It always seems to quote random point values. Ran for both conforming and jumbo but both were large amounts
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I refinanced last year from 6.5% to 4.375%. Since I have an accessory dwelling unit and live in the ADU and rent out the "main" house, it was viewed as an "investment" property--hence a higher rate. BUT, I was still thrilled to get the rate down by more than 2 percent.
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Couldn't get a mortgage. I have 700K in real estate with zero debt. I just wanted 80K.
As I lived overseas for a long time my credit is stale but OK.
After taking depreciation, my income seems very low (tax return). And I don't have a W-2 job.
I don't fit the cookie cutter I guess.